Making sound financial decisions with a partner
Arguments over money are among the most common reasons for break-ups and divorces, and many couples try to avoid these issues by being honest about their spending and reaching a joint money management agreements. However, one of the overlooked problems that can arise is not financial infidelity, one partner holding more credit card debt than the other or even differences in spending. Instead, a lack of communication about financial goals can put many couples in trouble.
A recent New York Times report shed light on couples that were happily married for decades, only to find out during retirement that they had competing goals for their future. Couples may avoid these scenarios, however, by having a conversation early on about the largest financial issues that may arise during their lifetimes: home, kids, education and retirement. By having more of these discussions before the events arise, couples can avoid shock and anger at disagreements and come up with a financial plan that works for both of them, the Times reports.
For example, one of the largest costs couples may incur during their lives together is a home. Before shopping for a new house, couples may benefit from coming to an agreement on the size they need, the amount they can afford and a spending threshold for furnishings. By being on the same page, couples will be less likely to overspend on a home or engage in arguments over their different options.
The same holds true when it comes to educating their children. Adults may have a different idea about whether they want to help cover the costs of their children’s education, with some wanting to pay for tuition and the other wanting the child to take out loans or save for school, the Times explains. Because the cost of an education is rising, talking about this topic beforehand may not only help couples reach a mutual agreement, but also plan ahead – or help their child plan ahead – by exploring savings and payment options. For example, investing in a 529 savings plan, seeking out scholarship and grant options and encouraging children to save more can lead to more manageable tuition bills.
Lastly, couples should be open about their retirement aspirations. It’s crucial to not only develop a plan for building adequate retirement savings, but to also discuss how to spend those savings. A couple’s golden years can be more difficult if one partner wants to travel and the other wants to remain at home or continue working.